FEATURE DISTRIBUTION 10 STEPS TO MANAGING COMPONENT ALLOCATION
Increasing demand for electronic components, especially from the automotive industry, has led to a tightening of supply. The Semiconductor Industry Association reported that sales across the world were up 22.6% in May compared to a month earlier. UK demand is also increasing with the ECSN reporting UK component sales up 24% year-on-year in May. As a result, allocation, the dreaded a-word, is back and we are seeing lengthening lead times on chip resistors and capacitors. How can purchasing managers protect themselves? Here Steve Rawlins, CEO, Anglia Componentsoutlines a ten-point plan – the first five are things to do before allocation hits and the second five are ways to limit the damage when it does
BEFORE ALLOCATION:
1. Place scheduled/forward orders Customers with scheduled forward orders are always in the best position if demand for a component exceeds supply. If you can’t commit to a schedule, offer your distributor a letter of intent which can be converted to orders on a rolling basis as the picture becomes clearer. It may be possible to negotiate for your distributor to hold buffer stock against a letter of intent giving you the best of both worlds; flexibility as well as guaranteed availability for a set period.
2. Use a distributor that maintains inventory Although many distributors especially listed companies have responded to shareholder pressure to reduce stock, privately owned businesses like Anglia can maintain a much higher level of inventory and are therefore able to offer a temporary buffer for customers when lead-times lengthen.
3. Choose a distributor with a transparent culture A good supply chain is based on transparency and Anlia has an open culture. Anglia Sigma gives a complete overview of your business with the distributor in one convenient dashboard.
4. Be open with your distributor The better Anglia understands your business the more it is able to help. A forecast is always good, but the distributor likes to understand what that forecast is based on and what factors influence demand in your business. Does good or bad weather affect sales? Do you see peaks, perhaps around one or more specific show or event? Do your sales track a particular industry?
5. Manage your own stock properly If you have your own buffer stock, manage it intelligently. Make sure that you know what you have. Anglia 80/20 has been introduced allowing smaller
8 FEBRUARY 2018 | ELECTRONICS
customers to hold an on-site buffer stock on a pay-per-use basis, and track their component usage in real time on the web. Management of the inventory to track consumption and adjust replenishment in line with changing demand patterns can also be done online. Booking in shipments should be quick, simple and automated.
DURING ALLOCATION
6. Keep up to date on demand patterns in the industry There is now no excuse for being ill- informed about lead times – Anglia publish this information on line. Lead times on every single part it offers are available on Anglia Live and are updated daily, together with its live stock. Order ten devices and see the stock level reduce in real time.
7. Extend your order cover as far as possible
It is fair to assume that the growth Anglia has seen will continue, and it will take a while for suppliers to increase capacity so lead times will likely continue to extend. Anglia are working hard with its customers to mitigate supply problems and protect them from lead time issues. In general, customers would be well advised to increase their order cover as far as possible to avoid problems later in the year. Even where this isn’t possible, as much visibility as possible on likely demand helps Anglia to help you.
10. Use brokers only as a last resort Most customers have used brokers on occasion when they really are up against it, but it is definitely a case of buyer beware. There are more and less reputable suppliers, and as a rule of thumb it is worth carefully checking and testing any components that have come to you by this route. The cost of such an exercise is tiny compared to the financial and reputational impact of a series of field failures.
RELATIONSHIP IS KEY If you habitually spot buy from brokers or other sources you will be exposed when allocation bites. Anglia believes in being transparent with its customers. When there isn’t enough stock to go round, a strong personal relationship is key to managing the situation and keeping everyone’s production turning.
Anglia Components
www.anglia.com T: 01945 474747
/ ELECTRONICS Figure 1:
Anglia is one of the UK's leading independent authorised distributors of semiconductors, optoelectronics,
interconnect, passive and electromechanical components
8. Be realistic about what you need and when When allocation hits, customers who are realistic in their expectations are much easier to support. If you really need 800 reels this week and another 1200 in a months’ time, say so, rather than pushing for 2000 reels now. The stock and forward orders Anglia has will only go so far, and it does its very best to keep all of its customer’s production lines turning if it possibly can.
9. Beware of multi-sourcing Franchised distributors have to report their point of sale to the supplier, so if you multi-source from several distributors this will be apparent. When allocation bites, placing multiple orders with several distributors can be dangerous. The supplier may well assume that you’re double or treble ordering, and put you at the back of the queue.
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